If You Think About It, It's Probably Time For A Planner

MICHELLE SINGLETARY COLOR OF MONEY

September 10, 2001|MICHELLE SINGLETARY COLOR OF MONEY

When is it time to hire a financial planner?

If you need to ask that question, it's probably time.

My husband and I found ourselves asking whether we needed to hire an expert to pore over every facet of our finances. We were unsure whether we had enough life insurance once our third child was born. We are setting aside money for our kids' college education, but is it enough?

All indications suggest that we are on track with our retirement savings, but we're worried that we haven't put that money into the right mix of investment funds to meet our goal of retiring by the time we both are 55.

I'm sure many of you have the same kinds of concerns. So, this is the first installment of an occasional series about why we hired a financial planner and how it's working out.

Honestly, I wasn't thrilled about paying someone money to tell me what to do with my money. My grandmother wouldn't approve of engaging the services of a financial planner. "Why pay somebody good money to do what you can do yourself?" Big Mama would say.

How true that might have been in her day. But now most families are faced with a cornucopia of financial choices.

Think about it. We are told to get life insurance. But how much is the right amount? Should you get term or a cash-value policy? Should you get long-term disability insurance? When do you need long-term care insurance? Got credit card bills? Should you pay them off with the cash in your savings account or the money saved in your 401(k) plan? Speaking of 401(k) plans, how should you invest the tax-deferred money? What's the best way to save for your kids' education? Do you know how much you will need in retirement? If you want to retire earlier than 591/2, how can you make withdrawals from your qualified retirement plans without triggering a penalty? An individual retirement account and a Roth IRA, which is better for you?

See what I mean?

My grandmother didn't have to worry about so many decisions. Big Mama's employer of 25 years provided her with a pension plan. She depended on her Social Security income to help supplement her pension and whatever she managed to save from her tiny salary. She had basic life insurance to cover the cost of putting her in the ground. That was basically it.

I know it's possible to navigate all the financial choices out there on your own. But sometimes it's time to call in a professional. It's like when your child gets an ear infection. By now I know all the signs -- tugging at the ear, crankiness, slight fever. All I need is that pink medicine and in a week or two my child will be fine.

But parents can't prescribe antibiotics, which clear up ear infections. You have to take your child in to see the doctor, and rightfully so. There could be something else wrong. You need to get an experienced, professional opinion just in case.

It's the same with your finances. You may have an idea of what to do but sometimes it's best to get a second, expert opinion. You don't want to find out that you can't retire at 65 because of uninformed or bad decisions made decades earlier.

So, it might be time to hire a planner. According to the Certified Financial Planner Board of Standards, you may decide to seek help from a professional financial planner if:

You need expertise you don't possess in certain areas of your finances. For example, a planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.

You want to get a professional opinion about the financial plan you developed for yourself.

You don't feel you have the time to do your own financial planning.

You have an immediate need or unexpected life event such as a birth, inheritance, or lump sum of cash coming your way.

You feel that a professional adviser could help you improve on how you are currently managing your finances.

You know that you need to improve your current financial situation but don't know where to start.

Most of all, don't expect miracles. Financial planners aren't prophets. They can't predict the future. They can't and shouldn't guarantee that their advice will make you the millionaire next door. What you should expect is someone who can help you achieve your financial goals.

Michelle Singletary is a Washington Post business writer. She can be reached by e-mail at singletarym@washpost.com.